Two international banks, Standard Chartered Plc and Citigroup Inc, have fallen out with Etisalat over $400m worth of loans made to the telco's failed Indian affiliate, Etisalat DB, according a report from Reuters, which cited three banking sources familiar with the matter.

The standoff was behind the two banks' decision not to participate in the $8bn financing to back Etisalat's bid for Vivendi's 53% stake in Maroc Telecom in April, the sources said.

According to the report, although the loans were made to Etisalat DB (EDB), Etisalat backed its Indian unit through "a letter of support", a lending practice where a parent company acknowledges support of its subsidiary's loan proposal but does not have a legal obligation concerning the loan.

Standard Chartered has around $300m exposure on the loan, while Citigroup has the remaining $100m, according to the sources.

A spokesman for Standard Chartered in Dubai declined to comment, as did a spokesman for Citigroup, according to Reuters.

Etisalat closed down its Indian operation in February 2012, shortly after India's Supreme Court suspended all 122 of the 2G licences that were awarded in 2008. The licences were suspended owing to a bribery scandal over how they had been awarded.